Credit risk breakthrough launched

CWB, a city computers consultancy now managed by former SocGen securities industry executive Hugh Hughes, has launched what is thought to be the most sophisticated credit risk management system in the banking industry.

The first system in the City, installed at Deutsche Bank, is about to go live. The more global the banking and securities business becomes, the more at risk the firms are from even a single rogue trader or rogue client. They also stand to get badly caught if the volatility of markets leads to the financial failure of a major counterparty.

This problem is compounded when banks or securities firms merge because it can take years before the computer systems and credit risk management are integrated.

The CWB system, known as Asterisk, can collate counterparty risk from all the business lines in a bank. Not only do the data then become available to management and supervisors online on one system, but they are also constantly updated.

Previous risk management systems either aggregate data by geographical area, for example exposure to Russia or emerging markets, or by product line, in bonds, currencies, equities and so on. This has made it almost impossible for management to keep track of their exposures.